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Why Google’s Running Out of Antitrust Political Tricks
Submitted by Scott Cleland on Tue, 2015-04-14 11:11
Just when Google needs it most, its political bag of tricks to dodge antitrust enforcement may be running out.
Reports that the EC is likely to issue a Statement of Objections ruling soon -- that Google is >90% dominant in search and search advertising and has illegally abused that dominance by promoting Google’s content and demoting competitors’ content -- indicates Google finally may be facing a global antitrust inflection point.
A tough EC SO would be a game-changer for Google, like the 2000 U.S. District Court case that ruled Microsoft an anti-competitive monopoly, proved to be a game-changing, global antitrust inflection point for Microsoft.
Substantively on the merits of the EC antitrust case, Google appears to have little room to maneuver. The EC effectively agrees with the FTC’s staff antitrust conclusions per the leaked FTC staff report. That finding is highly problematic for Google because: EU competition law is much tougher than America’s; Google’s relative >90% market dominance in Europe is much greater than in the U.S.; and Google doesn’t have the dominant political influence over Europe that it does with the U.S. Executive Branch.
Legally any company slapped with an EC SO faces long odds to win an appeal with Europe’s High Court. Google’s odds are even longer because of Google’s high-profile disrespect for Europe’s legal sovereignty. The EC’s Justice Department publicly accused Google of “passive-aggressiveness” towards Europe’s High Court, right-to-be-forgotten ruling, by encouraging evasion via Google.com. Google also just lost a seminal case before the Supreme Court of the United Kingdom where Google directly challenged Britain’s sovereignty over its citizens.
Politically Google appears to be running out of political tricks too.
Google is exceptionally political. The Washington Post called Google “a master of Washington influence.” The Wall Street Journal documented Google’s political influence over the White House and FTC in “Google Makes Most of Close Ties to the White House.”
And Public Citizen, a venerable American consumer watchdog organization, wrote “Mission Creepy,” a detailed cataloging that: “Google Is Quietly Becoming One of the Nation’s Most Powerful Political Forces While Expanding Its Information-Collection Empire.”
Nevertheless, Google’s political bag of tricks to thwart antitrust enforcement may be running out because Google’s remaining political tactics either have fatal flaws or they risk more cost than benefit.
Consider Google’s main political options.
Politically frame EC antitrust enforcement as radical.
Google’s problem here is EC Vice President for Competition Vestager is unlikely to advocate for any radical break-up of Google or any public disclosure of its most valuable trade secrets. She has widely-signaled she intends to pursue a tough, by-the-book, standard antitrust case against Google to establish a needed legal precedent for the digital era. She is more likely to mandate Google operate under a standard non-discrimination principle like the EC applied in the Microsoft case, which would flip the burden of proof, meaning Google would have to prove they were not anti-competitive when faced with complaints. Google may imagine antitrust enforcement against Google is “radical,” but antitrust enforcement is expected, especially when most know the EC gave Google three chances to propose sufficient antitrust remedies, and it was unwilling to do so three times.
Politically frame the EC antitrust enforcement as protectionist.
Google’s problem here is that the FTC staff report’s conclusions were very similar to what the EC is likely to advance. Google’s bigger problem here is that their needed political allies to make a protectionist argument work, Amazon, Facebook, eBay, Yahoo, et al. are complainants against Google’s abuse of its dominance, given the revelations of the leaked FTC staff report. Simply, it’s hard for Google’s normal tech allies to scream protectionism credibly when they are likely asking for EC protection from Google’s anti-competitive behavior behind the scenes.
Rally Republicans and right-of-center interests to charge the EU as protectionist.
Google’s hypocritical partisan pursuit of protection of its business interests via U.S. industrial policies, undercuts its political credibility in asking Republicans and right-of-center interests to carry its political water in Europe. Reportedly Senate Antitrust Subcommittee Chairman Lee is investigating whether Google used its White House political influence to make the FTC-Google antitrust case go away. In addition, Hill Republicans and right-of-center interests appreciate Google’s leadership role in calling for FCC industrial policy protection of its advertising business model by demanding net neutrality zero-price regulation of ISPs to ensure that Google-YouTube enjoys a very lucrative permanent price of zero for its massive and costly downstream Internet traffic.
Buy off selective opponents with settlement payments.
To date this has been Google’s go-to political trick to head off sanctions. The EC appreciates that over the last several years Google has made several selective multi-million dollar settlement payments to various European industry and political interests ostensibly in return for them dropping their complaints against Google. While this political tactic has served Google well in Europe to date, the sheer number of complainants, and the exploding amount of their alleged harms, makes this tawdry tactic much less effective, especially when everyone is watching more closely.
Go SOPA and rally Google users to defend Google’s free and innovative model.
With its back to the wall, Google may be tempted to leverage their dominant and intimate knowledge of how to best mass-influence European users’ actions, in order to get a critical mass of European users to join in a grassroots blitzkrieg of emails/calls to the EC/European Parliament (or to the 28 EU national parliaments) in defense of Google – a la the successful Google-led American SOPA-PIPA-blitzkreig of emails/calls to Congress in early 2012, or the successful Google-led European ACTA-blitzkrieg of emails/calls later in 2012.
This would be an extremely high risk political tactic for Google to attempt, given the European Parliament is already on record twice in the last six months voting overwhelming in support for tough antitrust enforcement against Google. Moreover, Europe has much stronger data protection laws and is united in enabling Europeans to control the use of their private information by dominant digital platforms like Google.
Hopefully, Google appreciates the extreme risk to Google’s broader interests of going to war with the EC and European Parliament over Europe asserting its sovereign right to enforce European rule of law in Europe.
Apparently Google’s bag of political tricks to thwart antitrust enforcement in Europe may be running out.
Scott Cleland is President of Precursor LLC, a consultancy serving Fortune 500 clients, some of which are Google competitors. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc. Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.